Government review urges the ACNC to use its carrot-and-stick powers but fails to fast-track fundraising reforms needed to ease the red-tape burden.
It’s been five years since some of the largest reforms to the Australian charities and not-for-profits sector took place. Under these reforms to fix a ‘broken’ system, the independent Australian Charities and Not‑for‑profits Commission (ACNC) was established as the sole body responsible for determining institutions’ charitable and benevolent status.
After some delay, on August 22, the government released its final report into a statutorily-required review considering whether the legislative framework governing this sector is operating properly and what reform is needed.
Following 172 submissions and 215 stakeholder meetings, the final report considers the trends impacting the sector and makes 30 recommendations into four areas including the objects, functions and powers of the Act and red-tape reduction.
Some of the review’s key findings included noting the strong industry support for the ACNC’s approach over its first five years. While observing that the ACNC’s existing powers were generally at the correct level, it recommended the ACNC should use carrot and stick powers more greatly – incentivising good behaviour and enforcing the law in cases of misconduct.
While pointing out that the recommendations have focused on shorter-term reform, the report did note the industry’s strong desire to move from individual state regimes to a national scheme over the long term.
Balancing oversight with red-tape relief
Just ask anyone that works in the charity and not-for-profit sector and they’ll tell you that charity can be hard work. Many people in this space operate with a fierce passion, relying on it to sustain them through unpredictable funding and associated shoestring budgets and skeleton staff as they try to address some of society’s biggest challenges.
They may be like Kim and Paul Powers who embarked on a journey to establish the Sunflower Foundation ten years ago, which focuses on empowering girls through education. As a non-government organisation, it attracts ‘substantial legal obligations’ as noted by DFAT. Kim, the current president, sums up the wishes of a lot of smaller charities to be freed of extensive red tape, as she told The Mandarin: “We need one national register, one national set of reporting standards and one national report annually.”
As she explains, under the current regime, despite being registered with a national body, charities still have to register for fundraising in almost every state. This duplicative burden is particularly complicated for smaller charities:
“Each state has different reporting requirements and fees, all due at different times. These may not be hundreds of dollars but they mount up.… When fundraising was done locally, this was less of a bugbear. But the internet recognises no borders, so if we want to raise funds online we must meet all the state demands as well. Ironically, [charities] are accepted on International charitable funding sites as legitimate if registered with the ACNC.”
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Recognising this burden, a key recommendation of the review urges the ACNC to lead the state and territory governments in harmonising fundraising laws. Disappointingly, if not pragmatic, for those charities wanting red-tape relief though, the report indicated that this would occur over the longer term.
Other areas for improvement include consolidating ACNC legislation, raising the revenue thresholds triggering minimum reporting requirements and eliminating duplications of regulation of companies by ASIC and the ACNC.
One of the review’s other recommendations targeting government actions to ensure it works better with the not-for-profit sector is to push to mandate departments and agencies to seek information from charities using the Charity Passport instead of adding administrative burdens re-requesting this information. Currently, only 4 of 18 Commonwealth Departments are using it.
Operating in a more sceptical world
With $129 billion in economic contributions per year employing over 1.3 million workers, the NFP space is big business. Consequently, this requires safeguards against corruption, especially as the world becomes tougher and more cynical.
According to an ACNC report commissioned late last year, trust and confidence in charities has been on the decline since 2013. High trust in charities in 2017 (24%) was six percentage points below 2015 findings and 13 percentage points less than 2013 when the survey was started. Those who outright distrust charities increased from 10% in 2015 to 14% in 2017. As the report states:
“The qualitative research conducted in previous years suggests that charity trustworthiness was a ‘given’. In other words, charities did not have to earn the trust of the general population. This year’s findings highlight they are somewhat more sceptical … charities now have to ‘earn’ peoples’ trust instead of people accepting them on face value.”
The final report also notes other disruptive factors operating in the not-for-profit sector:
“In recent decades [the sector] has also experienced major opportunities and disruptions including the outsourcing by governments of human services, competition for contracts from commercial companies, the development of outcomes measurement of services, introduction of consumer directed care services, new forms of online fundraising and the use of new technologies.”
Recommendations to help address this included loosening secrecy provisions to allow the commission to confirm whether it is conducting investigations to help protect public trust in the sector, and working more closely with AUSTRAC, the AFP and other Commonwealth departments and agencies to combat criminal misconduct and terrorism.
Rise of government outsourcing to NFPs
Despite good intentions, charities and governments have not always had the best working relationships. For example, a National Compact was established to provide a “shared vision for how the Australian Government and the NFP sector will work together in partnership in 2010”. This became defunct under the change in government, with no replacement implemented.
However, the trend for government outsourcing of human services means charities are correspondingly becoming more important in new areas. While there is competition from the private sector, the report notes that charities and not-for-profits provide services through “cross subsidisation to market segments that are not profitable for commercial companies”.
Although omitted from the report, we will probably hear more about how charities can be used to support government in tackling multi-faceted problems. Governments recognise that issues – especially the wicked ones – cannot be tackled in isolation, but still tend operate in silos (although there are some exceptions, such as Victoria’s Family Violence Reforms co-ordinating child protection agencies, health, welfare, education and police services).
As charities take a program-based approach to complex issue, they can be very valuable in tackling those issues that don’t fit neatly into single government portfolios, and already are playing a crucial role in rolling out government services such as the NDIS and aged care.
The importance of this sector may become more prominent in future when considering the growing role of social enterprises – that is, organisations with economic, social, cultural or environmental focuses consistent with a public or community benefit. However, one point not mentioned by the review is the challenges enterprises may face when their social enterprises don’t fit so into the boxes prescribed by government. Time will tell if this becomes an issue down the track.
Ultimately, while the review hasn’t been the silver bullet some in this sector may have hoped for to reduce red tape, the positive response to the ACNC by industry provides encouraging signs of things to come in future as this area continues to evolve and work more closely with government.